A feasibility study shows that a fixed capital investment of P10,000,000 is required for a proposed construction firm and an estimated working capital of P2,000,000. Annual depreciation is estimated to be10% of the fixed capital investment. Determine the rate of return on the total investment if the annual profit is P3,500,000. A. 28.33 % B. 29.17 % C. 30.12 % D. 30.78 %

The correct answer is B. 29.17%.

The rate of return on investment (ROI) is a measure of profitability. It is calculated by dividing the net profit by the total investment. In this case, the net profit is P3,500,000 and the total investment is P12,000,000 (P10,000,000 + P2,000,000). Therefore, the ROI is 29.17%.

Option A is incorrect because

it is the rate of return on the fixed capital investment only. Option C is incorrect because it is the rate of return on the working capital only. Option D is incorrect because it is the rate of return on the total investment, but it is rounded to the nearest whole number.

The formula for calculating ROI is:

ROI = (Net Profit / Total Investment) * 100%

In this case, the ROI is:

ROI = (P3,500,000 / P12,000,000) * 100% = 29.17%